December 3, 2023

Oil supplies are threatened by the escalation of the war in Ukraine by Russian President Vladimir Putin.

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Joe Redl/Getty Images

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Oil prices fell on Wednesday after Russian President Vladimir Putin’s escalation of the war in Ukraine raised new concerns about oil supplies from the country.

Internationally, Brent crude was down 0.5% at $90.19 a barrel, up as much as 2%. US benchmark West Texas Intermediate crude fell 0.7% to $83.32 a barrel.

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Shares of oil companies such as Exxon (ticker: XOM), Chevron (CVX) and Occidental Petroleum (OXY) were volatile on Wednesday.

Putin said he would use “all the means at our disposal” against “nuclear blackmail” as he mobilized partially reserve troops to fight in Ukraine. The comments follow the progress of Ukraine over the past few days which recaptured large areas of the occupied territories. His remarks also led to gains in haven assets such as the US dollar and gold.

The invasion in February initially raised crude oil prices as Western countries vowed to distance themselves from Russian energy. However, Russian supplies eventually found their way into global markets via Asia. The current surge threatens to disrupt the supply lines again.

Other forces are now reining in oil prices. The Federal Reserve is expected to deliver another aggressive interest rate hike on Wednesday, which will hit the economy and damp energy demand in the coming months.

At the end of the month, oil was on track for a first quarter decline in more than two years.

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Manufacturers are already warning that supplies could drop sharply when the world economy recovers. The head of state-backed Saudi oil company, Aramco, said on Tuesday that additional production capacity would be used quickly if demand picks up. The Organization of the Petroleum Exporting Countries is already struggling to meet its production targets.

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